Michelle Rodger: Always wise to hope for best but plan for worst

Published on Saturday 2 May 2009 13:32

A SURVEY of more than 1,000 business owners across the UK found that three out of 10 small and medium-sized enterprises expect to fail this year, almost half predict a cut in jobs and two-thirds believe profits will be down.

But the same survey discovered an interesting trend in business optimism and confidence in the future.

Despite the gloomy outlook there appears to be a growing breed of company still unaffected by the economic slowdown. The study found that these businesses – regardless of their sector – are more likely to be continuing to invest in their companies.

Paul Clark, whose company Plantronics carried out the research and identified this group as Super SMEs, says these businesses are bucking convention and by investing wisely are the most confident about the future. As a result, they are best-placed to operate in the rapidly changing marketplace.

The Plantronic survey revealed those currently surviving the recession and looking forward with confidence to the future have a number of common denominators: those with mobile workforces are 10% less likely to have been affected by the slowdown; more than half of those with older more experienced owners/directors are unconcerned about long-term survival.

Confident SMEs were three times more likely to have a worst-case scenario in place and SMEs with a woman at the helm were 30% more likely to be weathering the storm.

These companies are following the advice dished out by business advisers and entrepreneurs who have traded through previous recessions. They are aiming to provide excellent customer service, to invest in their people, to maintain quality while reducing debt and carefully managing cash flow. What makes them stand out from the less confident organisations is that they are consistently doing this better, quicker, smarter, more cost-effectively and much, much more innovatively.

Most unusually, however, those businesses performing well under recession conditions were all continuing to invest where their rivals were radically cutting costs. In particular, the winning behaviours were identified as investment in training, IT and telecoms, and marketing.

The businesses doing well are more likely to have increased training spend: while just 41% of SMES believe their workforce is equipped to reach their full potential and are reducing rather than increasing training budgets, Super SMEs were more likely to have increased investment with 39% spending more on their training in the past 12 months alone. Similarly, while overall marketing budgets had been slashed, 43% of the Super SMEs had increased their marketing spend and less than one in five had reduced it. IT spending amongst the Super SMEs was up too with 47% spending more on their technology infrastructure.

And the trends were the same for employee benefits, flexible working, communications technology and new product development.

What I found most interesting was that the so-called super performers also tended to have a slowdown plan in place. If you haven't got one, now would be a good time to write one. I'll definitely be working on mine. This is clearly where the old business philosophy of hoping for the best but planning for the worst comes into its own.

Serial entrepreneur Amanda Boyle has not only witnessed the Super SME behaviour firsthand – she sees it amongst some of the members of her business networking phenomenon Business9am – but was probably one of the originals. Boyle always made a point of investing in the most effective IT infrastructure for each specific business (she remembers one technical consultant specifying a system that could have taken her company to the moon, which would have been great had space travel actually been in her business plan).

Boyle, who co-founded shop-fitter Caledonia Contracts, is a former Woman of Achievement and Institute of Directors' Female Director and Non-Executive Director of the Year, believes spending on marketing, despite the recession, is a no-brainer. When everyone else stops spending, she insists it's the businesses with the foresight to maintain budgets that will be seen and heard. "I don't understand why that's difficult to grasp," she says.

"In good times or hard times, anyone who doesn't have a Plan B, and a Plan C, is always going to be reacting to rather than driving performance. And, personally, I prefer to be in the driving seat."

We know that SMEs are the engine room of the economy; small businesses in Britain employ 13.5 million people and contribute more than half of the UK's turnover. Harnessing the energy, leveraging the success and learning the experiences of this new turbo-powered breed of entrepreneurs will undoubtedly be key to the future.